Consumer Learning and Hybrid Vehicle Adoption

Abstract

We study the effect of differences in product quality on new technology diffusion. We propose a model in which heterogeneity in perceived product quality affects consumer adoption. If consumers experientially infer the quality of a technology, an increase in initial exposure to a low-quality product may inhibit subsequent diffusion. Incentives intended to speed up adoption may in fact have the opposite effect, if they propagate low-quality signals. We examine the predictions of the model using sales data for 11 hybrid-vehicle models between 2000 and 2006. Consistent with press reports that the first-generation Insight was perceived to be of lower quality than the first-generation Prius, we find that, conditional on overall hybrid vehicle adoption in the first 2 years, locations with a relatively high Prius market share experienced faster subsequent adoption than states with a relatively high Insight market share. We estimate the elasticity of new hybrid sales with respect to the Prius penetration rate is 0.30–0.58, while the elasticity with respect to the Insight penetration rate is \(-\)0.14 to \(-\)0.44.

De Haan P, Mueller M, Peters A (2006) Does the hybrid Toyota Prius lead to rebound effects? Analysis of size and number of cars previously owned by Swiss prius buyers”. Ecol Econ 58(3):592–605CrossRefGoogle Scholar

Lamberson PJ (2008) The diffusion of hybrid electric vehicles. In: Future research directions in sustainable mobility and accessibility, report by sustainable mobility accessibility research and transformation at the University of Michigan Center for Advancing Research and Solutions for SocietyGoogle Scholar